28 Feature AVIATION


Reaching new heights


With dynamic strategies for the future, Middle Eastern airlines are in it for the long haul


By any industry’s standard, the region’s airlines are some of the most successful businesses in the world. From the ‘big three’ of Etihad Airways, Emirates and Qatar Airways, to the equally strong flag carriers of their neighbouring coun- tries, Gulf aviation has soared. That growth has recently been impacted by various economic and political factors, but the airlines have responded with robust longterm strategies. Diversification will be key, as new routes but also new types of services offered to passengers are explored. Middle East carriers reported the strong-


est annual traffic growth of any region globally for the fifth year running in 2016, according to statistics from the International Air Transport Association (IATA). But there are concerns that growth is starting to overtake demand. Capac- ity growth of 13.7 percent outstripped demand last year, driving down the average load factor by 1.3 percentage points to 74.7 percent. “The seasonally-adjusted upward trend is


more robust than it looked a few months ago, but the bigger picture is that demand growth in the region continues to lag behind that of capac- ity. In 2017, we also expect higher oil prices to impact overall industry performance,” says IATA.


Adding to the impact felt from rising oil


prices pushing up the price of jet fuel, another issue is the backlash from US airlines over Gulf carriers’ expansion on American routes. The assertion is that Middle Eastern carriers have an unfair advantage as they are “government funded”, posing a challenge to increased expansion. Elsewhere, IATA predicts that other stalls to the success story of Gulf carriers could include increases in airport charges across the Middle East as well as growing air traffic management delays.


TURBULENT TIMES Aviation expert John Strickland believes that a “complex mix” of factors are impacting the region’s airline industry performance. “There is a certain amount of over-capac-


ity in the market and this is placing pressure on prices as airlines compete for customers,” he explains. “Some routes are being hit by lack of oil


traffic due to depressed oil prices and Brexit is going to affect demand in some markets due to exchange-rate volatility, especially the buying power of the UK pound.”


Strickland, an independent air transport


consultant and founder of JLS Consulting, adds: “While it’s too soon to ascertain whether the new US government will be more protection- ist over its airline industry, visa restrictions and the recent ban on laptops in cabins on direct flights from many Middle Eastern cities to the US are a very real concern to Gulf carriers and will certainly affect traffic volumes.” American Airlines, United, and Delta have


all approached US Secretary of State Rex Till- erson to discuss allegations that Gulf states are unfairly subsidising their carriers, driving down prices and crowding out competition on key routes. Emirates, Etihad Airways and Qatar Airways all deny this is the case. In December, Emirates launched its 11th


destination in the US with non-stop daily services to Fort Lauderdale, Florida. Three months later, the carrier introduced a new daily service to Newark via Athens, complementing the airline’s existing four-times-daily service to New York’s JFK airport. Emirates President Sir Tim Clark, who has


predicted a “flat” year for the airline, admits the road ahead is “littered with challenges”.


He says: “We are not immune to sluggish


economies, shifting consumer confidence and protectionist political landscapes. These factors impact our ability to serve customers in markets where we are denied access and also impact our customers’ demand for travel, and their travel patterns. Any potential shift away from liberali- sation would be bad news for consumers, busi- nesses and us. After all, Emirates is a product of multilateralism and liberalisation. “Our business model from the beginning


has been about connecting the world through the geo-centricity of Dubai, embracing compe- tition and tapping into global opportunities to offer consumers more travel options and better value for their money.” Never a company to sit still, like its Gulf


counterparts, Emirates has all the fundamen- tals in place to weather the storm, with a clear strategy for growth. Clark says: “Happily, the global appetite


for travel remains resilient. Despite all that has happened throughout 2016, be it terror attacks, laggard economic growth or social unrest, people still want to travel. Consumers merely recalibrate their travel plans.


“Any potential shift away from liberalisation would be


bad news for consumers, businesses and us. After all, Emirates is a product of multilateralism and liberalisation”


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1 Sir Tim Clark, Emirates President 2 Emirates Executive Lifestyle 3 Emirates A380 4 Emirates crew 3 4


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